A new study by Quest Offshore, prepared for the American Petroleum Institute (API) and the National Ocean Industries Association (NOIA), finds that a return to the pre-moratorium permitting rate for offshore drilling in the Gulf of Mexico would create 430,000 jobs by 2013.

In the wake of the April 2010 BP Macondo offshore oil rig blowout disaster, the Department of Interior (DOI) imposed a six-month moratorium on permits for new deepwater oil and gas drilling in the Gulf of Mexico. Although the moratorium officially targeted only deep water rigs, permitting for shallow water (less than 500 feet deep) drilling projects also slowed down. After the moratorium expired in November, an informal regime of bureaucratic foot-dragging, nickednamed the “permitorium,” delayed new projects through February 2011 or later. 

The Quest Offshore study, United States Gulf of Mexico Oil and Natural Gas Industry Economic Impact Analysis, estimates the job, GDP, and tax revenue gains of a full return to pre-Macondo permitting rates, taking into account “capital investment and purchases of intermediate goods undertaken by the oil and natural gas industry,” ”linkages to supplying industries,” and estimated “job creation and contribution to GDP associated with oil and natural gas development.” A unique feature of the study is its use of capital investment and spending data drawn from a “proprietary database of suppliers of capital equipment and intermediate goods to the Gulf of Mexico oil and natural gas operations.”

Some key findings:

• Volatile energy prices, the recession, the deepwater drilling moratorium, and the permitorium reduced total oil and gas-related spending in the Gulf by 15% — from $28.5 billion to $24.2 billion — over the 2008 to 2010 time period.
• Largely due to the moratorium, total spending declined 10% and capital spending declined 33% from 2009 to 2010.
• If permitting returns to the pre-Macondo rate, total oil and gas domestic spending in the Gulf is projected to increase from $24.2 billion in 2010 to $41.4 billion in 2013, a 71% increase. Capital expenditures are projected to reach $15.7 billion in 2013, a 141% increase from 2010 levels.
• The GDP contribution of Gulf offshore oil and gas expenditures declined by 15% from 2008 to 2010. If permitting returns to the pre-Macondo rate, the Gulf offshore oil and gas GDP contribution would increase from $26.1 billion in 2010 to $44.5 billion in 2013, a 70% increase.
• In 2010, the Gulf offshore oil and gas industry supported more than 60,000 direct jobs plus 180,000 indirect (equipment and service provider) and induced jobs.  Total employment in 2010 — 242,000 jobs — was 15% lower than in 2009, which was 7% lower than in 2008.
• If Gulf offshore permitting returns to the pre-Macondo rate, employment is projected to increase to 310,000 jobs in 2011, 350,000 jobs in 2012, and 430,000 jobs in 2013 — a 77% increase over the 2010 level.

Two charts from the study in particular convey the big picture:

Coal

Clean Water Act: The EPA has invented a “pollutant”— salinity—in order to stop surface coal mining in Appalachia.  It claims that this “pollutant” harms an order of short-lived insect, the Mayfly, which has not been proposed for listing as an endangered species.  The EPA has set a numeric water quality standard for salinity which effectively bars new surface coal mining permits.

Surface Mining Control and Reclamation Act: Despite the fact that the 1977 SMCRA explicitly authorizes “valley fills” (a necessary byproduct of surface coal mining in the steep terrain of Appalachia), the Department of the Interior is working on a re-interpretation of the so-called “100 feet buffer rule,” a regulation derivative of SMCRA, which would effectively outlaw valley fills, and, as a result, Appalachian surface coal mining.

Oil and gas

Red Tape: The de jure moratorium on deepwater drilling permits in the Western Gulf ended on 22 October 2011, but the de facto moratorium remains.  Two weeks ago, a federal judge in eastern Louisiana (the same one who overturned the first moratorium, and who then found the Department of the Interior in contempt for issuing an identical, second moratorium), ordered the Interior Department to act on 5 pending permits within 30 days.  Interior is also slow-walking shallow water permits.

Breaking the 2008 deal: President Obama has reneged on the deal made with the American people in 2008 when gas prices reached $4 a gallon.  He has re-instituted the moratorium on offshore oil and gas exploration in the eastern Gulf, the Atlantic, the Pacific, and most of the Alaska coast.  The Department of the Interior has cancelled or delayed exploration leases on federal land in the West.   And he is adamantly opposed to opening ANWR.

Wild Lands policy: It is as yet unclear what will be the effect of Interior Secretary Ken Salazar’s recent directive to take an inventory of BLM lands to discern which ones are “wild lands” unsuitable for oil and gas development.

Natural Gas

Safe Drinking Water Act: The 2005 Energy Policy Act exempted hydraulic fracturing (the drilling technological revolution that has vastly expanded North American recoverable gas reserves in the last decade), but environmentalists allege, without any evidence, that the practice harms water aquifers.  The EPA is conducting an investigation into the impact of “fracking” on drinking water.  It is due to be published sometime in 2012.

Clean Water Act: Although the EPA is trying to limit the application of its pending numeric water quality standard for salinity to the Appalachian coal industry, there is no legal basis for such a limitation, and environmentalists already are trying to expand the scope of the new standard to natural gas operations in the Marcellus Shale formations in the Northeast.